When its aging is done, is scotch diluted to its desired strength?

 Depends on the desired "strength" and many other factor z

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Scotch is diluted with highly filtered water, to bring the alcohol level down to the desired amount and then bottled. 

Yes, water is added to bring it to 40% ABV. Not much is known about the source of the water used in the dilution. My guess is that it's highly filtered or distilled so as not to mess with the tastes that were developed in making the mash and aging the spirits.

If this had been posted where it SHOULD be, in Food & Drink, I might have answered.

But, it wasn't.

I don't know a lot about brewing/distilling/ageing spirits. But I had thought, that it was only (traditionally) vodka and gin that was diluted. Since they are/can be made from fermenting virtually anything with a bit of sugar in (cereals, potatoes, even vegetable off-cuts/waste), the end result is generally unpalatable. So they're distilled up to 95-99% ABV to remove virtually all flavour and then diliuted back down to the desired concentration, usually 40%. 

I had thought, whiskey, brandy and rum were distilled, roughly to their desired concentration. Maybe some minor dilution for quality/consistency control.

There is undoubtedly a huge difference in aspects of the method between traditional and modern mass-marketed spirits, though principally the same. 

But ethanol is pretty volatile stuff, it evaporates a lot faster than water. If it's aged for months to years, perhaps the original 60% ABV is to account for evaporative loss? Which will be slow in its container/barrel/vat etc, but unless completely sealed, some loss will be inevitable. 

But this is merely speculation based on my very limited knowledge. So I'd love to be corrected and find out the real answer if I am on the wrong lines. Interesting question. 

Horrendous idea, try telling that to the Scots.